Income Tax Appellate Tribunal - Lucknow
M/S. U.P.State Bridge Corporation ... vs Assessee on 30 April, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "A", LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER
AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER
ITA No.580/LKW/2012
Assessment Year:2009-10
M/s U.P. State Bridge Corporation Ltd. v. DCIT-6
Setu Bhawan Lucknow
16, Madan Mohan Malviya Marg
Lucknow
TAN/PAN:AAACY3258K
(Appellant) (Respondent)
ITA No.585/LKW/2012
Assessment Year:2009-10
DCIT-6 v. M/s U.P. State Bridge Corporation Ltd.
Lucknow Setu Bhawan
16, Madan Mohan Malviya Marg
Lucknow
TAN/PAN:AAACY3258K
(Appellant) (Respondent)
ITA No.212 & 213/LKW/2013
Assessment Year:2006-07 & 2007-08
M/s U.P. State Bridge Corporation Ltd. v. DCIT-6
Setu Bhawan Lucknow
16, Madan Mohan Malviya Marg
Lucknow
TAN/PAN:AAACY3258K
(Appellant) (Respondent)
ITA No.266/LKW/2013
Assessment Year:2007-08
DCIT-6 v. M/s U.P. State Bridge Corporation Ltd.
Lucknow Setu Bhawan
16, Madan Mohan Malviya Marg
Lucknow
TAN/PAN:AAACY3258K
(Appellant) (Respondent)
:-2-:
ITA No.157/LKW/2014
Assessment Year:2010-11
DCIT-6 v. M/s U.P. State Bridge Corporation Ltd.
Lucknow Setu Bhawan
16, Madan Mohan Malviya Marg
Lucknow
TAN/PAN:AAACY3258K
(Appellant) (Respondent)
ITA No.255/LKW/2014
Assessment Year:2010-11
M/s U.P. State Bridge Corporation Ltd. v. DCIT-6
Setu Bhawan Lucknow
16, Madan Mohan Malviya Marg
Lucknow
TAN/PAN:AAACY3258K
(Appellant) (Respondent)
Assessee by: Shri. B. P. Yadav, Cost Accountant
Department by: Dr. Anand Kumar Agarwal, CIT (DR)
Date of hearing: 30 03 2015
Date of pronouncement: 30 04 2015
ORDER
PER SUNIL KUMAR YADAV:
These appeals are preferred by the assessee as well as the Revenue against the respective orders of the ld. CIT(A).
2. Since common grounds are involved in these appeals, these were heard together and are being disposed of through this consolidated order. We, however, prefer to adjudicate them one after the other.
I.T.A. No. 580/LKW/2012 & 585/LKW/2012:
3. Appeal in I.T.A. No. 580/LKW/2012 is preferred by the assessee assailing the order of the ld. CIT(A), inter alia, on the following grounds:-
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1. The Commissioner of Income Tax (Appeals)-ll, Lucknow (hereinafter referred to as the Ld. CIT(A) erred on facts and in law in confirming the addition of Rs.8,79,05,9087- made by the Ld. A.O. in the hands of the appellant ignoring the facts of the instant case that the expenses incurred by the appellant on temporary errection/accommodation is fully allowable expenditure.
2. The Ld. CIT(A) erred on facts and in law in confirming the addition of Rs. 22,60,18,330/-made by the Ld. A.O. in the hands of the appellant ignoring the facts of the present case.
3. The Ld. CIT(A) erred on facts and in law in confirming the addition of Rs.11,55,272/-made by the Ld. A.O. in the hands of the appellant without appreciating the facts of the present case that the expenses pertaining to prior period were accrued crystallized during the relevant year and are fully allowable.
4. The Ld. CIT(A) erred on facts and in law in not providing the appellant reasonable and sufficient opportunity to have its say and to make compliances of the reasons being relied upon by him in making addition in the hands of the appellant.
5. The appellant reserves it right to advance such other grounds before or at the hearing, which it may consider fit and appropriate, for which it craves leaves to amend, alter or otherwise modify the grounds appearing hereinbefore with the kind permission of the Hon'ble Bench.
4. In I.T.A. No. 585/LKW/2012, the Revenue has assailed the order of the ld. CIT(A), inter alia, on the following grounds:-
1. The CIT(A) has erred in law and on facts in restricting the disallowance made out of site accommodation expenses to Rs.8,79,05,908/- against Rs.10,16,41206/- made by the AO. He failed to appreciate that in th absence of any details the A.O. was justified in allowing depreciation at the general rate prescribed for buildings instead of allowing the entire expenditure as a deduction.
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The CIT(A) has allowed the assessee to write off l/5th of the expenses claimed in this year, _ which is not permissible as per the Income-tax, Act. The action of the A.O. is justified in view of the decision of Hon'ble Gawhati High Court in the case of CIT vs. Sibson Construction & Co. 221 ITR468.
2. The CIT(A) has erred in law and on facts of the case in restricting the disallowance of Rs.24,59,61,124/- out of scaffolding & shuttering expenses to Rs. 2,60,18,330/-. He failed to appreciate that the jurisdictional High Court of Allahabad in the case of M/s Harijan Avas Nirmal Varg Avas vs. CIT 229 ITR 776 (Alld.) has held that such equipment/expenses are in the nature of 'plant' and that as such the assessee is entitled to claim only depreciation on them. He failed to appreciate that since the assessee did 'not file details of the dates of acquisition of such 'plant', the A.O. was justified in presuming that they had worded for less than 6 months in the year and in restricting depreciation allowable on such plant to 7.5% only i.e. 50% of the general rate of depreciation allowable on machinery.
5. In both these appeals, there are two grounds - one is with regard to the disallowance of expenses incurred on temporary erections/site accommodation and the other is with regard to the disallowance of scaffolding and shuttering expenses.
6. With regard to ground No.1, in both the appeals, relating to disallowance of expenses incurred on temporary erections and site accommodation, the facts in brief culled out from the orders of the lower authorities are that the Assessing Officer has made disallowance of Rs.10,16,41,206/- on account of site accommodation expenses having observed that the assessee has not given any details relating to the nature of such camp construction. Having relied upon the judgment of the Hon'ble Gawhati High Court in the case of CIT vs. Sibson Construction & Co., 221 ITR 468, the Assessing Officer has allowed depreciation at 7.5% i.e. Rs.82,41,179/- and made disallowance of the extra claim of :-5-:
Rs.10,16,41,206/- as revenue expenditure and added the same to the income of the assessee.
7. Assessee preferred an appeal before the ld. CIT(A) with the submission that the structures consist of temporary site accommodation and general site arrangements and are eligible for 100% depreciation. It was also contended that the rate of 7.5% adopted by the Assessing Officer does not exist in the Statute at present. The ld. CIT(A) re-examined the claim of the assessee and being convinced with the explanations of the assessee, he was of the view that the cost of site accommodation needs to be allowed equally to the life of the project i.e. five years and therefore the cost would be spread over five years. He accordingly computed the allowable expenditure at 1/5th of the total claim of Rs.10,98,82,385/- which comes to Rs.2,19,76,477/-. Accordingly the disallowance was restricted to Rs.8,79,05,908/-.
8. Aggrieved, the assessee as well as the Revenue are in appeal before the Tribunal.
9. During the course of hearing of the appeal, the ld. counsel for the assessee has submitted that the assessee is a Government undertaking and is engaged in the business of civil construction and as a matter of regular practice, at the time of compiling various essential components of estimated cost in connection with construction of any bridge for any client, the assessee is always making a provision for Temporary Site Accommodation and General Site Arrangement between 1.80% and 2.10% of the total cost of construction of any bridge depending upon various features i.e. size of the bridge, soil conditions, expected duration of the project, general circulation of areas, on-site traffic congestion, status of ground water level, seismic ground motion data, drainage facilities, effects on the existing adjacent structures and other geotechnical aspects. In order to corroborate the fact that it is a separate and vital component of :-6-:
cost of any bridge, the assessee has filed the copy of an office order regarding administrative and financial sanction in respect of construction of a bridge along with details of its estimated cost before the ld. CIT(A). The expenditures incurred on this account have separately shown in the audited financial statement under a particular head of account for providing necessary information to the management, Government, statutory bodies, etc. It was further contended that the construction of the bridge can be considered as production with temporary factory. The project site being the factory where the contractor like assessee makes the product on site. The bridge construction over water crossings, highways, urban areas effected with dense traffic, etc generally offers many challenges i.e. minimal disturbance to surroundings, providing a more concentrated work area for superstructure assembly, possibly increased worker safety for providing improved erection environment, etc. Any slackness in this respect will lead to project failure, significant delays, increase in construction costs and frequent claims or penalties to be imposed by clients. In other words, the proper preliminary arrangements reduce the margin of uncertainty. He has also placed reliance upon the written submissions filed before the ld. CIT(A). The ld. counsel for the assessee has submitted that in earlier assessment years, no disallowance of this nature was ever made though assessments were framed under section 143(3) of the Act. In support of his contention, the ld. counsel for the assessee has placed reliance upon the assessment orders for assessment years 2004-05 to 2008-09, in which no disallowance under this head was ever made. The ld. counsel for the assessee has further contended that following the rule of consistency, no disallowance can be made in the impugned assessment year.
10. The ld. D.R., on the other hand, has placed reliance upon the order of the Assessing Officer. Besides, it was also contended that the assessee has not furnished complete details before the lower authorities and the :-7-:
expenses thereof; whereas the ld. counsel for the assessee has submitted that the accounts of the assessee are duly audited and complete details were furnished before the Assessing Officer.
11. Having carefully examined the orders of the lower authorities in the light of the rival submissions and the documents placed on record, we find that the assessee has been conducting similar nature of activities since its inception. The assessments for assessment years 2004-05 to 2008-09 were framed under section 143(3) of the Act and the assessee has claimed similar type of expenses in those assessment years, but no disallowance has ever been made by the Assessing Officer in any of these assessment year. Copies of the assessment orders for assessment years 2004-05 to 2008-09 are available at pages 102 to 111 of the compilation of the assessee.
12. We have also carefully examined the facts available on record in the light of the assessee's contentions and we are of the view that the assessee has been maintaining proper books of account and in the light of the nature of activities undertaken by the assessee, we find force in the contentions of the ld. counsel for the assessee that at every site temporary constructions are made and a particular percentage of expenditure is debited to the account under the head "temporary site accommodation" and whatever materials were left out from the site, they are being reutilized further. Therefore, no excess claim was raised by the assessee. Since no disallowance was ever made in earlier assessment years, we find no justification in the disallowance made in this very assessment year, as the Assessing Officer cannot blow hot and cold in the same breath by admitting the claim of the assessee in one assessment year and denying the same in the succeeding assessment year. We are, therefore, of the view that the claim of the assessee is reasonable and is allowable. Accordingly we set aside the order of the ld. CIT(A) in this regard and allow the claim of the :-8-:
assessee. Accordingly, the addition sustained by the ld. CIT(A) is hereby deleted.
13. Ground No.2 in both the appeals relates to the disallowance of expenses incurred on shuttering, centering, scaffolding, etc.
14. The brief facts culled out from the orders of the lower authorities in this regard are that the Assessing Officer has made an addition of Rs.24,59,61,124/- on account of shuttering, centering, scaffolding, etc. having observed that shuttering is a part of plant and machinery and as per section 32 of the Act, 100% depreciation cannot be allowed on any plant and machinery. Having noted that the details of date-wise purchase of shuttering have not been produced before him, he allowed depreciation only at 7.5% i.e. at Rs.1,99,42,794/-. Accordingly extra revenue expenditure claimed under this head at Rs.24,59,61,124/- was disallowed and added to the income of the assessee.
15. The assessee has preferred an appeal before the ld. CIT(A) with the submission that the expenses relating to shuttering, centering, scaffolding, etc. are allowable at 100%, as these items are nothing but consumable stores which would either be used in the construction or written off as and when it becomes necessary.
16. The ld. CIT(A) re-examined the claim of the assessee and being partly convinced with it, he allowed depreciation at 15% and restricted the addition to Rs.22,60,18,330/-.
17. Aggrieved, the assessee as well as the Revenue are in appeal before the Tribunal.
18. During the course of hearing, the ld. counsel for the assessee has submitted that the assessee is engaged in the construction of bridges, flyovers, underways and similar projects on a large scale. All the activities require shuttering, centering, scaffolding, etc. which may be elaborated as a false work erected to give temporary support to concrete structure and it :-9-:
is removed after the concrete gains strength. It also includes temporary support structures for frame-work used to mould concrete to form a desired shape and scaffolding to give workers access to the structure being constructed. It was further contended that looking into the complexities involved in the nature of activities undertaken by the assessee, where the probabilities of accidents including threat upon human life is very high, no compromise with the quality standards of shuttering, etc. may be made because entire structure depends upon these items. Regardless of the fact that in case of building construction activities, the life of shuttering materials may be more but in case of complex and specialized structures like bridges, etc. its usable life could not be compared with the similar items used in other civil works. In other words, keeping in view the peculiar facts and circumstances of the present case, the expenditure incurred on account of shuttering, centering, scaffolding, etc. may only be regarded as consumables.
19. It was further contended that for the purpose of pursuing its activities, the assessee requires thousands of different varieties of materials right from small nut and bolts to steel pipes, sheets, etc. for which purchases are being made from time to time in bulk or otherwise also. Keeping in view the quality of shuttering, etc. they are regularly being used in connection with the activities of the assessee. In this regard, the assessee is consistently following a system of accounting whereby the value of those items, which become useless or unserviceable or get exhausted during the year, are written off in the manufacturing account. On the other hand, value of those items, which remain serviceable or fit for future work, are included in the closing stock. The assessee has also placed reliance upon the detailed submissions furnished before the ld. CIT(A) and the same is available at pages 41 to 52 of the compilation of the assessee. The ld. counsel for the assessee has also submitted that in earlier years, no disallowance was made under this head though the assessments were :-10-:
framed under section 143(3) of the Act. Reliance was also placed upon the order of the Tribunal in the assessee's own case for assessment year 1995- 96, in which the Tribunal has followed its earlier order for assessment year 1988-89 and has directed the Assessing Officer to allow 100% depreciation on the cost of shuttering, centering, scaffolding, etc. Copy of the order of the Tribunal is also placed on record.
20. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that no disallowance was made by the Assessing Officer in this regard during the earlier assessment years i.e. 2004-05 to 2008-09 though the assessments were framed under section 143(3) of the Act. Copies of the assessment orders are placed at pages 102 to 110 of the compilation of the assessee.
21. We have also carefully examined the order of the Tribunal in the assessee's own case pertaining to assessment year 1995-96 which is available at pages 33 to 42 of compilation of the assessee filed along with appeal memo, in which the Tribunal has followed its earlier order for assessment year 1988-89 and has directed the Assessing Officer to allow 100% depreciation on the cost of shuttering, centering, scaffolding, etc. This order was passed on 31.1.2011 and nothing is placed before us on behalf of the Revenue with regard to any contrary views taken by the Tribunal or the High Court on this issue in the assessee's case.
22. Our attention was also invited to the fact that the assessee has been debiting a particular amount per cubic meter to the cost of the project as expenses incurred in shuttering, centering, scaffolding, etc. keeping in view the complexity of nature of work. Copy of the office circular is available at page 54 of the compilation of the assessee, in which guidelines have been laid down for debit of Rs.600/- per cubic meter on account of shuttering, centering, scaffolding, etc. Keeping in view the totality of the facts and circumstances of the case and the nature of complexity of the work, we are :-11-:
of the view that the assessee's claim of expenses on shuttering, centering, scaffolding, etc. raised as per circulars issued by the Department is an allowable expenditure in the light of the order of the Tribunal in the assessee's own case. It is also evident from the record that in earlier year no disallowance was made on this account. Therefore, following the rule of consistency, disallowance cannot be made in the impugned assessment year without any valid reason. We accordingly find no merit in the disallowance and we set aside the order of the ld. CIT(A) and delete the addition in this regard.
23. Ground No.3 in the assessee's appeal relates to the disallowance of prior period expenses.
24. In this regard, it is noticed from the orders of the lower authorities that the assessee has claimed a sum of Rs.11,55,272/- as prior period expenses which were disallowed by the Assessing Officer having observed that the assessee has been following mercantile system of accounting, hence the expenses relating to previous years' cannot be allowed to set off from the current year profit.
25. Assessee preferred an appeal before the ld. CIT(A) with the submission that though these expenses are prior period expenses, but they were crystallized during the year under consideration and therefore allowable as revenue expenditure in this year. Except oral submissions, the ld. counsel for the assessee could not place any evidence in this regard before the ld. CIT(A) and the ld. CIT(A), therefore, confirmed the said disallowance.
26. Aggrieved, the assessee is in appeal before the Tribunal, but during the course of hearing of the appeal, the ld. counsel for the assessee has raised similar arguments as raised before the ld. CIT(A), but could not place any documentary evidence to substantiate that the prior period expenses have been crystallized in the impugned assessment year. In the :-12-:
absence of any evidence, we find no merit in the contentions of the assessee. Accordingly, we confirm the order of the ld. CIT(A) who has rightly dealt with the issue.
27. Accordingly these appeals are disposed of.
I.T.A. No. 266/LKW/2013:
28. This appeal is preferred by the Revenue against the order of the ld. CIT(A) on a solitary ground that the ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.10,01,685/- made by the Assessing Officer by way of disallowances of expenses claimed for payment under the head pension contribution for employees of the Corporation.
29. At the very outset, the learned Counsel for the assessee has submitted that the tax effect involved in this appeal is less than the prescribed monetary limit, therefore, the Department ought not to have filed this appeal in view of the instructions issued by C.B.D.T.
30. The Learned D. R. did not controvert the above fact.
31. It is noticed that Section 268A of the Act has been inserted by the Finance Act, 2008 with retrospective effect from 1.4.1999. The provisions contained in section 268A read as under:-
"268A. (1) The Board may, from time to time, issue orders, instructions or directions to other income-tax authorities, fixing such monetary limits as it may deem fit, for the purpose of regulating filing of appeal or application for reference by any income-tax authority under the provisions of this Chapter.
(2) Where, in pursuance of the orders, instructions or directions issued under sub-section (1), an income-tax authority has not filed any appeal or application for reference on any issue in the case of an assessee for any assessment year, it shall not preclude such authority from :-13-:
filing an appeal or application for reference on the same issue in the case of--
(a) the same assessee for any other assessment year; or
(b)any other assessee for the same or any other assessment year.
(3) Notwithstanding that no appeal or application for reference has been filed by an income-tax authority pursuant to the orders or instructions or directions issued under sub-section (1), it shall not be lawful for an assessee, being a party in any appeal or reference, to contend that the income-tax authority has acquiesced in the decision on the disputed issue by not filing an appeal or application for reference in any case.
(4) The Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to the orders, instructions or directions issued under sub-section (1) and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case. (5) Every order, instruction or direction which has been issued by the Board fixing monetary limits for filing an appeal or application for reference shall be deemed to have been issued under sub-section (1) and the provisions of sub-sections (2), (3) and (4) shall apply accordingly.]"
32. It is not in dispute that the Board's instructions or directions issued to the Income-tax Authorities are binding on the Income-tax authorities, therefore, the Department ought not to have filed this appeal in view of the provisions of section 268A of the Act, since the tax effect in the instant case is less than the amount prescribed for not filing the appeal. Accordingly, this appeal is dismissed.
33. Accordingly, this appeal of the Revenue is dismissed.
I.T.A. No. 212&213/LKW/2013:
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34. In these appeals, the assessee has assailed the order of the ld. CIT(A) on a common ground that the ld. CIT(A) has confirmed the addition of the prior period expenses for the reason that the expenses were not crystallized in the impugned assessment year.
35. In these cases, the assessee has claimed prior period expenses on the ground that they were crystallized in the impugned assessment year, but no evidence was either placed before the Assessing Officer or before the ld. CIT(A). Even before the Tribunal no evidence is placed in order to establish that these prior period expenses have been crystallized in the impugned assessment year.
36. Identical issue has already been examined by us in the foregoing paras wherein we have held that disallowance on account of prior period expenses deserves to be confirmed in the absence of any documentary evidence in order to establish that the prior period expenses have been crystallized in the impugned assessment year. Following the view taken in the foregoing appeals, we confirm the order of the ld. CIT(A) in this regard.
37. Accordingly, both the appeals of the assessee are dismissed.
I.T.A. No. 157 & 255/LKW/2014:
38. These are cross-appeals by the assessee as well as the Revenue against the order of the ld. CIT(A) for assessment year 2010-11.
39. The grounds raised by the assessee in I.T.A. No. 255/LKW/2014 are as under:-
1. The ld. CIT(A)-II, Lucknow erred on facts and in law in confirming the addition of Rs.12,80,00,000/- made by the Assessing Officer in the hands of the appellant ignoring the facts of the instant case that the provision for foreseen loss was made by the assessee in its books of account as per the guidelines issued by the Institute of Chartered Accountants of India.
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2. The Ld. CIT(A) erred on facts and in law in confirming the addition of Rs.47,43,633/- made by the Ld. A.O. in the hands of the appellant without appreciating the facts of the present case that the expenses pertaining to prior period were incurred wholly and exclusively for the business of the assessee and neither personal in nature nor capital in nature and crystallized during the relevant year and are fully allowable.
3. The Ld. CIT(A) erred on facts and in law in confirming the addition of Rs.4,50,000/-made by the Ld. A.O. in the hands of the appellant by invoking the provisions of section 40(a)(ia) of the I.T. Act, 1961 without appreciating the facts of the appellant.
4. The Ld. CIT(A) erred on facts and in law in confirming the addition of Rs.5,34,01,092/-made by the Ld. A.O. in the hands of the appellant without appreciating the fact that all the expenses debited to the Profit & Loss Account under the head "Temporary Site Accommodation" are revenue expenses and accepted by the Department in all the scrutiny assessments made in the previous years.
5. The Ld. CIT(A) erred on facts and in law in confirming the additions of Rs.28,29,34,751/-made by the Ld. A.O. in the hands of the appellant without appreciating the fact that all the expenses debited to the Profit & Loss Account under the head "shuttering, centering, scaffolding " are truly revenue in nature and accepted by the Department in all the scrutiny assessments made in the previous years.
6. The Ld. CIT(A) erred on facts and in law in not providing the appellant reasonable and sufficient opportunity to have its say and to make compliances of the reasons being relied upon by him in making addition in the hands of the appellant.
40. The grounds raised by the Revenue in I.T.A. No. 157/LKW/2014 are as under:-
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1. The CIT(A) has erred in law and on facts in restricting the disallowance made out of temporary site accommodation expenses to Rs.5,34,01,092/- as against Rs.7,35,38,013/-made by the AO by allowing relief of Rs.2,01,36,921/-. The CIT(A) failed to appreciate that in the absence of any details the A.O, was justified in allowing depreciation at the general rate prescribed for buildings instead of allowing the entire expenditure as a deduction. The CIT(A) has allowed the assessee to write off 1/5th of the expenses claimed in this year, which is not permissible as per the Income Tax Act. The action of the A.O. is justified in view of the decision of Hon'ble Gawhati high Court in the case of CIT vs. Sibson Construction & Co. 221 ITR 468.
2. The CIT(A) has erred in law and on facts in allowing deduction u/s 80IA of the IT. Act, 196.1 at Rs.7,62,89,122/- to the assessee ignoring the fact that the above claim of deduction has not been substantiated by the assessee during the assessment proceedings and is not allowable as per provision of Section 80AB of the IT. Act, 1961.
41. Ground No.1 in the Revenue's appeal in I.T.A. No. 157/LKW/2014 and grounds No.4 & 5 in the assessee's appeal in I.T.A. No. 255/LKW/2014 relates to the disallowance made on account of expenditure under the head temporary site accommodation and shuttering, centering, scaffolding, etc.
42. These issues have already been examined by us in the foregoing appeals in which we have held that expenditures on these heads are allowable expenditure and the additions made thereon were to be deleted. We, therefore, following the same decide this issue in favour of the assessee. Accordingly the addition made on account of disallowance of temporary site accommodation and shuttering, centering, scaffolding, etc. are deleted.
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43. Ground No.2 in the Revenue's appeal I.T.A. No. 157/LKW/2014 relates to the disallowance of deduction under section 80-IA of the Act at Rs.7,62,89,122/-.
44. In this regard, the ld. counsel for the assessee has invited our attention to the fact that in earlier assessment years i.e. 2007-08 and 2008- 09 the claim raised under section 80-IA of the Act was allowed. It was further contended that in the initial assessment years i.e. 2003-04 and 2004-05 the claim made by the assessee under section 80-IA of the Act was disallowed by the Assessing Officer, but later on the ld. CIT(A) decided the matter in favour of the assessee and the Revenue did not agitate the issue before the Tribunal. Therefore, it attained finality and thereafter in assessment years 2005-06 and 2007-08, no disallowance was made by the Assessing Officer in this regard. The ld. counsel for the assessee has further contended that the ld. CIT(A) has called remand report on this issue from the Assessing Officer and having examined the issue in detail, he has allowed the claim of the assessee. Therefore, no interference is called for in the order of the ld. CIT(A) on this issue.
45. The ld. D.R., on the other hand, has placed reliance upon the order of the Assessing Officer.
46. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that the claim of deduction under section 80-IA of the Act was allowed in assessment years 2005-06 and 2007-08 by the Assessing Officer himself and in assessment year 2003-04 the claim was disallowed, but later on it was allowed by the ld. CIT(A) and the Revenue has not challenged the order of the ld. CIT(A) before the Tribunal. Therefore, it attained finality. Therefore, in the light of these facts, we find no infirmity in the order of the ld. CIT(A) who has rightly allowed the claim of the assessee under section 80-IA of the Act. Accordingly, we confirm the order of the ld. CIT(A) on this issue. :-18-:
47. In the assessee's appeal in I.T.A. No. 255/LKW/2014, ground No.1 relates to the addition of 12.80 crores made by the Assessing Officer having disallowed the provision for "foreseen loss" made by the assessee in its books of account.
48. In this regard, the facts borne out from the record are that the assessee has made provision for "foreseen loss" at Rs.12.80 crores in its books of account, but it was disallowed by the Assessing Officer having noted that the assessee could not file any evidence on the basis of which it has created the provision for "foreseen loss".
49. An appeal was preferred before the ld. CIT(A), but the disallowance was confirmed by the ld. CIT(A), as the assessee could not place satisfactory evidence to justify the creation of provision for "foreseen loss"
in its books of account.
50. Now the assessee is before us with the submission that it has created the provision as per guidelines issued by the Institute of Chartered Accountants of India through Accounting Standard-7, therefore, the same may be allowed. During the course of hearing, the ld. counsel for the assessee was asked to explain as to on what basis and for what reason assessee is making the provision for "foreseen loss". In response thereto, it was contended that the assessee is engaged in such a business where unforeseen losses are mandatory and every year assessee is suffering certain losses which cannot be quantified and the assessee is making a provision for the same on estimate basis.
51. The ld. D.R., on the other hand, has contended that the provision can only be made on the basis of ascertained liabilities. Whenever assessee suffers a loss, the assessee is free to debit the same to its profit and loss account.
52. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that the assessee has not placed any :-19-:
evidence on record to demonstrate the basis for making provision for "foreseen loss". No doubt, foreseen loss may be possible in the business of the assessee as it is engaged in complicated construction work, but without any basis provision for foreseen loss cannot be created. We are, therefore, of the view that the whenever loss is suffered, it can be debited to its profit and loss account and the Revenue may allow the same after making necessary verification. Accordingly we hold that in the impugned assessment year provision for foreseen loss cannot be allowed, but the assessee will be allowed to debit the actual loss suffered by it in any of the assessment year and the same would be allowed by the Revenue after making necessary verification.
53. Ground No.2 in the assessee's appeal in I.T.A. No. 255/LKW/2014 relates to the disallowance of prior period expenses booked in this year.
54. Identical issue was examined by us in the foregoing paras where we have confirmed the addition having noted that the assessee could not place any evidence to establish that the prior period liabilities have been crystalised in the impugned assessment year. Similar is the position in the instant case, as nothing is placed on record to establish that the liabilities for earlier years have been crystalised in the impugned assessment year. Accordingly, following the view taken in the foregoing paras, we confirm the addition.
55. Ground No.3 in the assessee's appeal in I.T.A. No. 255/LKW/2014 relates to the addition of Rs.4.50 lakhs made by the Assessing Officer in the hands of the assessee after invoking the provisions of section 40(a)(ia) of the Act. In this regard, it is noticed that the Assessing Officer has made disallowance of payment of Rs.4.50 lakhs on non-deduction of TDS. The disallowance was confirmed by the ld. CIT(A). The ld. counsel for the assessee has submitted that the payment was made in the nature of advance, therefore, the same cannot be disallowed on non-deduction of :-20-:
TDS. In the light of these facts, we are of the view that this issue requires a fresh adjudication by the lower authorities after necessary verification with regard to the nature of payment. Accordingly we set aside the order of the ld. CIT(A) and restore the matter to the file of the Assessing Officer with a direction to adjudicate this issue in the light of evidence with regard to the nature of payment. Accordingly, this appeal of the assessee is disposed of.
56. In the result, appeals of the assessee in I.T.A. No. 580/LKW/2012 is partly allowed, I.T.A. No. 212 & 213/LKW/2013 are dismissed and I.T.A. No. 255/LKW/2014 is partly allowed for statistical purposes and appeals of the Revenue in I.T.A. No. 585/LKW/2012, 266/LKW/2013 and 157/LKW/2014 are dismissed.
Order was pronounced in the open court on the date mentioned on the captioned page.
Sd/- Sd/-
[A. K. GARODIA] [SUNIL KUMAR YADAV]
ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED:30th April, 2015
JJ:222304
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
Assistant Registrar